Stocks strengthen on Fed's economic assessment

NEW YORK (AP) -- The stock market was modestly higher Wednesday after the Federal Reserve issued a more upbeat assessment of the economy.

Major stock indexes had fallen before the Fed released its statement following a two-day meeting on interest rates, then advanced as investors digested the central bank's statement. Treasury prices reversed direction and fell after the statement as investors withdrew money from safe haven holdings.

The Fed said it believes that "economic activity has continued to strengthen" since its last meeting in December. However, the Fed did not repeat its assertion that the housing market is improving.

The Fed said it is leaving interest rates near zero, as expected, but also that Kansas City Federal Reserve President Thomas Hoenig has voted against the decision to keep rates low.

Jamie Cox of Harris Financial Group in Colonial Heights, Va., said Hoenig's vote signals the central bank is moving closer to boosting rates.

"That means there are a couple of people who feel like that the economy is getting better at a nice rate that no longer warrants these exceptionally low rates," he said.

Stocks had fallen ahead of the report as a 7.6 percent drop in sales of new homes in December brought concerns about the economy.

In midafternoon trading, the Dow Jones industrial average rose 10.51, or 0.1 percent, to 10,204.80. It had been down 40 ahead of the Fed's announcement.